Answer:
A 10% increase in revenue will produce a A) 15.0 % change in net income
Explanation:
Net income before increasing in revenue = sales - Cost of goods sold - Variable operating expenses - fixed operating expenses = $300,000 - $200,000 - $40,000 - $20,000 = $40,000
Revenue after increasing = $300,000 + $300,000 x 10% = $330,000
When revenue increase, variable costs will increase.
Cost of goods sold = $200,000 + $200,000 x 10% = $220,000
Variable operating expenses = $40,000 + $40,000 x 10% = $44,000
Net income after increasing in revenue = sales - Cost of goods sold - Variable operating expenses - fixed operating expenses = $330,000 - $220,000 - $44,000 - $20,000 = $46,000
Change in net income = ($46,000 - $40,000)/$40,000 = 15.0%
